5 States With The Highest and Lowest Income Taxes
By Dale Hines
Blue RAM Media/Gulf Coast News
August 4, 2025
BALDWIN COUNTY, Ala. It’s understandable to feel envious of people who live in states with low- or no-income taxes. After all, having to pay high federal and state taxes can take a large chunk out of your annual income.
But if you’re comparing places to live, look at the big picture and consider other local taxes, experts say. Because if state income taxes are low, you’re likely paying higher property or sales taxes to compensate for that.
“Washington State famously has no income tax, but they do have high sales tax, and Oregon is the opposite. So, you want to look at the whole picture,” says Heather Liston, a certified financial planner, enrolled agent, and principal at Clarity Financial in San Francisco.
States with the highest income tax rates
That said, there are some states where income taxes take a much bigger bite out of residents’ earnings. The states with the highest tax rates are as follows.
Keep in mind that some states use a graduated, or progressive, tax system where income is bunched into chunks, each of which is taxed at a different rate. This list focuses on each state’s highest tax rate, also called the marginal tax rate.
States with the highest tax rates
California 13.3%
Hawaii 11%
New York 10.9%
New Jersey, Washington D.C. 10.75%
Oregon 9.9%
Sources: State tax websites. All rates are for 2025 unless unavailable, in which case 2024 rates are shown. Note: California’s top rate is 12.3% but the state adds a 1% mental health service tax on income of $1 million+.
All of the states (and Washington D.C.) in the list above have graduated, aka progressive, tax systems. In a progressive tax system, your marginal tax rate is the top rate you pay, but your effective, or actual, tax rate is a blend of rates and is generally lower than your marginal rate.
Note that a state’s top tax rate often only affects the people who make the highest taxable incomes.
“People will think of California, for example, and their highest tax rate is much higher than the average around the country. But that’s for high- income earners and not for those making mid $40-$60k per year.
Here are two examples of how California’s current tax rates apply to specific situations:
A married couple that files jointly with $125,000 in taxable income pays a top rate of 8 percent.
A single person with $40,000 in taxable income pays a top rate of 4 percent.
And portions of income for all taxpayers in California are taxed at 1 percent and 2 percent. In fact, California has a total of nine different tax brackets. That’s the nature of a progressive tax system: Your income is separated into different chunks, each of which is taxed at a different rate.
And California’s 12.3 percent rate?
For a married couple filing jointly, that 12.3% rate applies solely to income above $1,442,628 in 2024.
For a single filer, 12.3 percent applies to income above $721,314 in 2024.
States with the lowest income tax rates
At the other end of the tax spectrum, nine states have no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. (Washington does tax capital gains income for some high earners.)
The states that levy an income tax but have the lowest rates in the country are as follows.
North Dakota, Arizona 2.5%
Indiana, Louisiana 3%
Pennsylvania 3.07%
Ohio 3.5%
Iowa 3.8%
Sources: State tax websites. All rates are for 2025 unless unavailable, in which case 2024 rates are shown.
Five of these states have flat tax structures — Arizona, Indiana, Iowa, Louisiana, and Pennsylvania — while North Dakota and Ohio have a graduated, or progressive tax structure.
And even then, what you get for those taxes can be drastically different.
Local and state taxes pay for services that matter to us, such as garbage pick-up, fire and police services, road repairs, lights, and other amenities.
Comparing states solely by income tax rates doesn’t necessarily give a fair picture of what you’ll pay in overall taxes if you live there. There’s no free lunch, and states must pay for services somehow, Malone says.
Taxpayers also should consider their earning potential in a particular location to fully understand how a place’s taxes will affect their finances.
If you’re a retiree or thinking about where you might want to retire someday, also consider what kind of breaks are available. “A lot of states may have state tax, but then offer tax credits, deductions, and incentives for retirees, to motivate retirees to live in the state.
What matters are things like, where do your children and grandchildren live? Where can you get a house with no stairs, or whatever else you need for aging in place? What kind of cultural things do you enjoy?
Taxes should be a small part of your consideration when thinking of a state to live in.
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